S. Korea to seize on delay of cross-strait trade pact approval

By Ted Chen, The China Post

TAIPEI, Taiwan — As political wrangling and public scrutiny mire the approval process of the recently inked cross-strait service industries trade pact, South Korea has stepped in to sign its own bilateral trade agreement with China, threatening Taiwan’s singular position in the Chinese market.

The PRC Ministry of Commerce announced on September 17 that it has completed preliminary negotiations with South Korea and indicated that the two nations consented to the listing of about 90 percent of products initially proposed for tariff-free status, representing 85 percent of net imports.

While South Korea appears to be making great strides in reaching tariff exemption accords with its major trading partners, Taiwan still cannot obtain official governmental approval of the cross-strait service industries trade pact.

According to Huang Deng-shing (黃登興), research fellow at the Institute of Economics, Academia Sinica (中研院經濟研究所), China and South Korea’s agreement to list over 90 percent of bilaterally-traded goods under tariff-free status creates concerns that Taiwan-made products may be crowded out in the China market.

At this juncture, however, it is difficult to gauge the ramifications of future trade without further analysis, said Huang. Taiwan and South Korea share a markedly similar export profile in China, and the bolstering of trade agreements between South Korea and the PRC may spell doom for Taiwan’s prospects.

Limited by its comparatively small domestic market as well as weaker research and development capabilities, Taiwan now faces the possibility of losing its ability to compete head-to-head with South Korea, warned Huang, who added that Taiwan’s situation is exacerbated by the growing competitiveness of PRC enterprises.

Taiwan is challenged on two fronts, with its export volume stagnating below that of the U.S. and Japan just as South Korea and China make strides to increase their own competitiveness.

In light of an overwhelming public outcry and political impasse, Huang noted that in retrospect, the push for greater trade with China may have seen less obstacles if governing bodies had focused on the trade of goods rather than the deregulation of services industries, a much more sensitive topic among the public.

The Taiwan Institute of Economic Research (台灣經濟研究院) stated that if South Korea continues to surge ahead in signing trade agreements with China while bilateral pacts such as ECFA continue to flounder or produce no tangible results, Taiwan’s trade competitiveness may be seriously weakened, at least in areas outside of commercial services and air and ocean freight transport.